Information on Ecosystem Growth and Emissions Adjustment

Governance
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Summary

In this forum topic, we will provide more clarity behind the recently published vote proposal. We understand it was voted down, and while we respect the decision, we believe it’s important to share the full reasoning behind the proposal and highlight the long-term benefits we had in mind. By doing so, we hope to provide more context on why we thought this was the right move for the future of PancakeSwap.

Background

Firstly, we deeply value the community’s feedback; transparency is a top priority. Many of you have voiced your thoughts, and we’ve considered them. Please continue asking questions and sharing your feedback on this forum.

We published a blog post on 3 October 2024 addressing some common concerns. We also conducted an AMA on 10 October 2024 to share our thoughts on this topic, among other things. You may refer to these resources to get up to speed.

Proposal Overview

The proposal’s crux was redirecting 3,000 CAKE per day from Farms (~10% of the current Farms’ emissions) to a new allocation of Ecosystem Growth proposed to replace the existing Multichain Warchest.

This emission redirection would be phased in across several epochs and aligns with our previous emission cuts from 2023, which helped turn CAKE from an inflationary to a deflationary token. Relabelling our Multichain Warchest as Ecosystem Growth also expands that allocation’s scope, allowing us to use the emissions for products like the upcoming PancakeSwap v4, instead of just chain expansions.

Why reduce Farm Emissions further?

1. Building Ultrasound CAKE
Last year, we embarked on a journey to make CAKE “ultrasound”—to shift from an inflationary to a deflationary model. Through strategic emissions management, we achieved this in a few months without negatively impacting our volumes and market share. CAKE’s total supply decreased by ~2% in the past year. The latest proposal continues this effort.

2. Sustaining Growth and Flexibility
We’ve seen stable or growing market share across all our chain deployments in the past 6 months, notably on BNB Chain (>80% volume share consistently), Arbitrum (~10% volume share), and Base (~5% volume share). Additionally, rates for liquidity providers are very competitive, with ETH-USDC pools on Base earning ~100% APR and ETH-USDC and ETH-USDT on Arbitrum earning ~75-100% APR.

This is higher than most competitors’ on these deployments. Reducing emissions now would allow us to conserve resources for future growth. If we see growth stall at any point, we can reintroduce emissions to help drive further expansion. Allowing PancakeSwap to achieve sustainable long-term growth benefits all ecosystem participants.

3. Bribe Efficiency
One key reason for the 10% reduction was to improve veCAKE’s bribe efficiency. Currently, PancakeSwap’s bribe efficiency is higher than competitors’, sitting around 1.35x-1.45x compared to others at 1.1x-1.3x. By aligning our emissions more closely with market standards, we position ourselves to maintain long-term sustainability while remaining competitive.

How the Ecosystem Growth Allocation will be used

Our initial focus will be on PancakeSwap v4 and further chain expansions. We’re especially excited about PancakeSwap v4, as it opens our ecosystem to developers for the first time and can potentially enhance our competitiveness as a DEX.

1. $250,000 Grant Program for hook development
This proposed program is designed to fund hook development within our ecosystem, encouraging developers to create valuable hooks that will enhance user experience on PancakeSwap v4.

The Kitchen will publish Requests for Proposals for specific hook needs identified internally and invite developers to apply. We will select the best proposal and supervise its development process. The grant amount will be awarded after development is complete. We will also set up an open category where developers can suggest any hook they want to build and be funded if we find it innovative and relevant.

This $250,000 will be sourced from funds already accrued to the Multichain Warchest allocation in the past. No additional CAKE emission is needed to fund this program.

2. Emission Program for high-performing hooks
We proposed to earmark 0.05 CAKE per block for an Emission Program to reward the most profitable hooks on PancakeSwap v4 on an ongoing basis.

Hook developers may need help attracting liquidity despite having built a great hook. Hence, we want to reward hooks with good market traction with CAKE emissions to direct even more liquidity toward them, setting them up for success.

Ultimately, the more revenue these hooks generate, the more CAKE burn our ecosystem will enjoy, so all stakeholders are aligned.

We will implement this program carefully to ensure we don’t produce more emissions than necessary. The eventual aim is for the CAKE burn generated by these high-performing hooks to outweigh the emissions we channel towards them.

Next Steps

We will use this forum topic to listen to community feedback and answer any further questions. Based on the feedback received, we will edit the content and re-publish a vote proposal more aligned with the community sentiment.

We may decide to split it into two separate proposals – one for the emission redirection, and another for the relabelling of the Multichain Warchest allocation as Ecosystem Growth, since initial feedback signals that most are agreeable to support growth efforts like PancakeSwap v4.

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No matter how much you explain, if cakepie objects, it’s over because cakepie has the majority of the votes. I think this situation needs to be changed. For example, by setting a limit on the number of votes that can be cast with one account.

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I am looking same with you.

CKP won’t agree on the proposal, it’s taking money from their purse.

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I guess the rejection for proposal comes from the following reasons:

  1. Reduce the revenue for the veCAKE holding projects:
    The proposal effectively reduces the gauge emissions of CAKE, which directly diminishes the incentive for projects to provide rewards for votes on projects, such as Cakepie, etc. This simply means those veCAKE collecting projects reduce the revenue.

  2. Lack of Compensation:
    While I can understand PancakeSwap’s intentions behind the proposal, they never offer any compensation for the up above disadvantage.

Given these issues, I vote “No” for this proposal. We can recognize the importance of strategic deploying CAKE as rewards for liquidity providers and support this initiative in principle. But I cannot accept to reduce my 10% profit for it.

Proposed Solution: To address these concerns, I suggest an adjustment where 1000 CAKE per day could be redirected from the farm to Ecosystem Growth fund. This amount would then be distributed as vote incentives for LPs based on the amount of veCAKE held by each project, like Cakepie.

This approach would not only align with PancakeSwap’s strategic goals to incentivize liquidity providers but also ensure that veCAKE collecting projects benefit from increased earnings due to enhanced incentives proportional to their veCAKE holdings.

This solution could foster a more equitable distribution of rewards and support the overall ecosystem’s growth, benefiting all parties involved. Of course, the amount of emission reduction CAKE should be needs further research.

Please consider this proposal.

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If hooks are not incentivized, they will not gain traction. And there is no better incentive for veCAKE holders than a fully functioning v4 and many hooks working well.

That is why I support this proposal. But I understand the community’s concern and I think this concern can be minimized if the kitchen commits to:

  1. Using the ecosystem growth fund only for an initial bootstrap (not eternally) on new chains and also on v4.

  2. After the initial allocation for each hook or multichain, the kitchen commits to releasing reports every epoch(or another time range) about the efficiency of the allocation.

  3. One thing that could also work is for the allocation to hooks to be done through bribes. In other words, we approve these 3k CAKE to the fund and the kitchen distributes it in bribes, so that the cake emissions go to the hooks. This strengthens veCAKE and strengthens hooks.

  4. As hooks mature, reduce the incentives based on the same type of evaluation and allocation of the main pools that happens today. Strengthen the gauge system and let the voting market direct incentives to them, including hooks made by projects, allowing projects to incentivize through the bribe system.

That said, I think the community should understand that the v4 launch is a big thing and the kitchen is simply proposing features to make the launch a success. A strong v4 will mean more liquidity, more swap usability, more volume, more CAKE burning, etc.

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Very well put. I’m thinking that more than likely this is boiling down to an issue that’ll be best resolved by going a step further and having two separate proposals. This will help users feel more confident in knowing what they’re voting for as you are able to help articulate straightforwardly what the change is what it’s going to do and they don’t have to worry about some secondary effects due to other content in the Proposal.

If this is truly best for PancakeSwap Then I’d recommend going this direction as you have a better chance of getting at least one of the proposals through and in addition to this, It’ll at least generate some extra user engagement which is always good.

I am seeing a lot about CakePie, forgive me for being unfamiliar with the numbers at the current time, but it sounds like they have a significant portion of the vote and while this may be unfortunate to some others may not care the end result is — what can we do about it?

Ultimately at the end of the day, if we want to get these proposals past, and they are not in favor of one or the other part of this proposal all the more reason to break it into two that way, we can try and work with them at least. I really do believe that would be the best option as It’s the same case with other majority stakeholders maybe they just aren’t a fan of one part of the plan, but are for the other.

Either way, thank you for breaking it down further for us and considering the communities needs.

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I support the idea that the allocation to hooks to be done through bribes would solve the problem.

The concern of accumulators is decreasing gauge emission base leads to decreasing bribes. The allocation to hooks to be done through bribes directly compensate for the amount of bribes. If the PCS proposes as like that, accumulators would support it.

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Hi everyone,

As part of PancakeSwap V4, the introduction of HOOKS is a major development. To support their rollout and ensure their success, I propose a community-driven funding approach.

The idea would be to raise a certain amount of capital (for example, $1 million) to finance and incentivize the adoption of HOOKS. Contributors to this funding round would be repaid at a fixed rate, determined in advance, over the next few years, through a combination of CAKE emissions and platform-generated profits.

This flexible funding model would not only support innovation but also reward the community for actively engaging in the project.

What do you think? Could this be a viable solution to accelerate the adoption of HOOKS while reinforcing the community’s involvement with PancakeSwap?

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I propose an alternative strategy to fund the operation of HOOKS and the V4 of PancakeSwap. Specifically, I suggest we reduce the CAKE allocation currently distributed in the lottery and activate quests in both the Prediction platform and the lottery game.

This approach is feasible and could attract as many players, if not more, than the lottery without the need to mint and distribute excessive amounts of CAKE. By saving on the distribution of CAKE in the lottery, we can allocate those funds to support the development of the HOOKS.

For more details on activating quests, check out my proposal here: Weekly Quests on PancakeSwap Prediction.

Taking these funds directly from the lottery will not impact the various communities that stake CAKE (like StakeDAO and CakePie) and will allow us to reach a conclusive vote quickly.

What are your thoughts on this proposal?

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Will only proposals that are favorable to cakepie be implemented in the future? That would be bad for pancakeswap and the community. If we find a way to change this situation, I think proposals that are beneficial to pancakeswap and the community will be passed.

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For example, if kitchen votes the same number of times against cakepie, the vote will reflect only the opinion of the community. A vote that ignores everyone’s opinion based solely on the opinion of one institution is meaningless.

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Even though we have a strong community, only one person, cakepie, has the majority of votes, so the community’s opinions are ignored and only proposals that benefit cakepie are decided. If the situation cannot be changed, I think the kitchen should only make proposals to cakepie. There is no point in explaining to the community.

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I, as community member, against this approach.
In a nutshell it looks for me the following: lets transfer control of 3,000 CAKE emission from DAO/veCAKE holders to the Kitchen (project team).
In a well distributed system I believe interests of the project team and token holders are not perfectly aligned.

So I as veCAKE holder would be glad to support project development, however I would propose 3 things:

  1. Redistribute much smaller amount of emission from Farms incentives to ecosystem growth incentives
  2. Accumulate CAKE’s for ecosystem growth incentives in a separate vault
  3. Allocation of CAKE’s from vault should be completed via community voting, not by Kitchen decision
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Hi all, thank you for the outpouring of feedback. This is very much appreciated, please keep them coming. Here’s my perspective on some of the more prominent topics mentioned.

Re: Reduce the amount of emission redirection to Ecosystem Growth

We are open to suggestions from the community. So far, we have seen a suggestion of 1000 CAKE per day instead of 3000. We will take into consideration all community suggestions.

Re: Reduction of revenue for veCAKE Managers when emissions to Farms decrease

While a reduction in Farm emissions could potentially result in veCAKE Managers receiving fewer bribes overall in the short term, it is important to note that the current bribe efficiency is around 1.5x, which is the highest in the market. There is still sufficient room for the respective veCAKE Managers to attract bribes even with the projected decrease in emissions.

In fact, a majority of the existing bribes are recurring in nature and would likely stay on the platform even with the reduction. We suggest the respective veCAKE Managers should continue growing the bribe market to the point where the efficiency ratio is similar to or even lower than competitors’ (around 1.07x - 1.11x), before we strongly oppose any form of emission reduction. If the current emission is not being efficiently utilized, it may be better to redirect them to more productive means that can benefit the entire PancakeSwap ecosystem.

After all, the veCAKE Managers and their communities are heavily reliant on the performance of CAKE in the long run to maintain their business viability. It is also in their interest to further the ultrasound CAKE agenda and support a sustainable, deflationary CAKE token.

Re: Using reduced Farm emission as bribes via veCAKE Managers

While we are not opposed to such a move, doing so would restrict the amount of bribes that the veCAKE Managers can receive from third party protocols, helping them in the short term but potentially restricting PancakeSwap’s ability to attract more liquidity from other projects in the long term.

The Kitchen is currently already distributing 500 CAKE per day towards veCAKE Managers as bribes, with the aim of boosting veCAKE votes towards core pairs that bring high CAKE burn.

veCAKE Managers should consider focusing their efforts on business development to source for new bribes from interested protocols, as the current bribe efficiency ratio is still very healthy and would be attractive to many projects.

Re: Usage of Ecosystem Growth and Transparency

We agree that the usage of the Ecosystem Growth allocation should be reported regularly on the forum to ensure efficiency, and we are committed to doing so.

We also agree that the use of the funds should be temporary and will be scaled back over time as we allow third party protocols to bribe on their own. However, it is important to note that not all the Ecosystem Growth will be spent on emissions. For example, we proposed some of it to be used as one-time grants to incentivize developers to build hooks, which would definitely not continue perpetually.

Overall, we agree the Kitchen should be accountable to the community in using the Ecosystem Growth allocation and will provide regular transparency reports to ensure this accountability. The detailed deployment of the funds will be reported in these posts and all community feedback will be incorporated on an ongoing basis for future Ecosystem Growth activities.

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